But Amyris is still there, and this week achieved what, for many,
was the last-chance, must-hit milestone. The company’s
purpose-built, 50 million liter industrial fermentation facility in
Paraiso, Brazil has successfully begun production of Biofene,
Amyris’s brand of renewable farnesene.

“Our own farnesene plant at Paraiso has been successfully
commissioned, with initial farnesene production underway. We
anticipate sales from this facility during the first quarter of
2013,” Melo concluded.”

So what exactly is farnesene, again? It’s a fragrant oil chemical –
that distinctive acrid odor you detect in a Granny Smith Apple,
that’s it. You also find traces of it in the hops used for some very
nice Czech pilasters and Irish lager beers. It’s used as a component
in its own right by manufacturers around the world.

Amyris’ storied IPO and post-IPO peril

The Amyris strategy — commercialize farnesene for the chemical
markets, then turn to farnesane, which you produce by adding
hydrogen. Farnesane is the company’s showcase diesel molecule, and
forms the basis of its breakout from a speciality pharma and
chemicals maker to a fuel player, though that business will
ultimately be run by Total.

In its 2010 IPO, there were partnerships announced with Bunge (BG)
and Cosan (CZZ)
for lubricants, Soliance for renewable cosmetics, M&G for PET
production (the key ingredient in clear plastic bottles) and a
series of deals with Procter & Gamble to incorporate farnesene
in specialty chemical applications within P&G’s products.

Then came the expected ramp-up to 6-9 million liters of production
for 2011 – and then the story changed when the company’s scale up
timetable imploded and it was forced in early 2012 to pull its
guidance on future production.

We noted that “a flurry of JVs and partnerships focused both on the
chemicals and fuels markets, demonstrates that Amyris is fully
embarked on an integrated strategy of flexible product lines, an
impressive array of partnerships and contract manufacturing
arrangements to keep the company on its “capital light” path.” But
we flagged the “Major open question? Performance of the magic bug at
industrial scale.”

Following the failure to achieve its stated production goals,
post-IPO, the stock was crushed — from a high of $33 to a low point
of $1.45 – recovering in recent months to yesterday’s close of
$2.64. The company restructured management, and put all its chips on
getting its 50 million liter Paraiso plant up and running.

Fresh Capital Raised

Meanwhile, its key investors — notably, French oil giant Total —
hung tough, and stayed with the vision. This week, with Biolding,
Total and Temasek pumping in another $42.5 million, in acquiring
another 14.2 million shares, or an additional 19 percent of the
company’s equity.

Singapore’s sovereign wealth investment fund, Temasek, was the
largest investor in the round, adding $15 million to their
investment total, putting them behind only Total on the shareholder
tote board.

The deal didn’t come cheap for Amyris — by contrast, it sold 17
percent of the equity, just before the IPO, to Total for $133
million.

“Cash proceeds were $37.25 million, plus Total converted $5 million
from an outstanding convertible note,” said Raymond James equity
analyst Pavel Molchanov in a note to investors yesterday. “The
“implied” equity sales price is $2.98, a small premium to
yesterday’s closing price, though there is no getting around the
fact that this is still a substantially dilutive deal.”

“A private placement with existing investors should help fund
operations,” wrote Cowen & Company’s Rob Stone and James
Medvedeff, “but we already model $20MM/year in funded R&D as
well as $146MM additional debt to fund losses and Sao Martinho capex
in 2013-15.”

But it’s a capital lifeline and as CEO John Melo noted, “We are
encouraged by the continued, strong commitment from our major
investors, particularly as we start up our new industrial
fermentation facility for the production of our renewable
hydrocarbons in Brazil.”

The new scale-up timeline

Amyris these days doesn’t offer forward production guidance although
they noted that farnesene sales from Pariso were expected in Q1
2013. “We expect the plant to ramp throughout 2013 and achieve full
utilization by 1Q14,” said Molchanov.

Stone and Medvedeff added, “Ramp risk remains and we model losses
through 2015. [We] lifted 2014-15E shipments about 8% and 11%, but
we trimmed 2013E 19% as we see a slow ramp. We estimate feedstock
and operating cost may be 15-20% higher, but AMRS should still
benefit from additional sales and spreading of fixed costs,
particularly as initial volume is targeted at higher value end
products.”

The bottom line

The capital raise is dilutive, and the opening of Paraiso was
expected — accordingly, AMRS shares dropped yesterday on NASDAQ
following the announcement.

But it’s a remarkable production milestone for the company —
substantially de-risking the venture as a whole and offering hope to
Amyris’ investors and backers that the company is getting back to
playing offense and putting points on the board after a lengthy
period in which the doubters reigned.

Next steps: producing at capacity at Pariso and — the big
challenge moving forward— moving down the cost curve so that the
company continues its journey towards the long-desired markets in
fuels and larger volume lubricants and chemicals.